Algeria's Business Climate
Distribution and Sales Channels
Algeria's well-developed distribution system includes an extensive network of wholesale and retail outlets, most of which are controlled by private entrepreneurs. Although state-owned wholesale marketing firms continue to sell importer foodstuffs, pharmaceuticals, and industrial supplies and equipment, private wholesalers are becoming increasingly active in these sectors. The government is in the midst of privatizing state-owned distribution outlets, and Algeria's retail trade is almost exclusively controlled by private businesspeople.
Use of Agents/Distributors
Within the framework of Algeria's 1993 Investment Code, foreign suppliers no longer need to invest in Algeria to establish distributorships. They may use local agents or distributors, or alternatively, may establish their own distribution companies. Algerian law prohibits foreign firms from using commercial agents to bid on government tenders.
Although franchising is not widespread in Algeria, private firms are becoming increasingly interested. Coca-Cola and a private Algerian food processing company, for example, established a successful local bottling operation in 1993.
In January 1996, the Government declared a law allowing Algerian companies to lease foreign-produced equipment. Private firms recently have expressed growing interest in leasing, particularly construction equipment. The Agricultural Mutual Bank, in partnership with a large insurance company and the privately-owned Union Bank, established an agricultural equipment leasing company in July 1997.
Recognizing that the country lacks the resources to upgrade state-owned manufacturing plants, the Algerian government is actively encouraging foreign investors to assist them. Algerian companies --desperate for technical expertise from foreign partners necessary to compete at the national, regional and global levels -- are offering equity incentives in joint ventures.
Selling to the Government
Algerian government agencies (including ministries and local government units) purchase foreign-made goods through tender processes that are open to all potential suppliers. The Law on Public Tenders administers Algerian government procurement. It mandates a 2 percent bid bond and a 5 percent performance bond. Foreign bidders must deal directly with the client agency, but tender documents, which list tender procedures and requirements, can also be obtained through local representatives or embassies.
Government agencies and public companies may choose to work directly with foreign companies within the framework of what are termed "limited consultations" with at least 3 suppliers. It is common practice for government entities and state-owned enterprises to request financing in their tenders.
Advertising and Trade Promotion
Direct advertising of equipment and machinery has only a marginal impact on the local end user. Advertising does not influence state-owned companies, since they import on the basis of international open tenders. On the other hand, with the liberalization of Algeria's import regime, advertising is becoming increasingly effective for consumer products. Algeria's Radio and Television Service does accept advertisements.
The annual Algiers International Fair in June is the hub of Algerian trade promotion events. In recent years, the Algerian Fair Authority (SAFEX), and a private firm, Group ABH, have organized several fairs centered around industrial sectors. Ongoing economic reforms may increase international interest in such events.
Suppliers of capital goods to the Algerian market are expected to provide sales service and customer support. Fee sales service is normally provided for a one-year period. After this period expires, suppliers may enter into agreements to provide customers remunerated sales service, referred to in Algeria as "technical assistance."
Foreign suppliers provide customer support services through local liaison offices. Since these offices are prohibited from engaging in commercial activities, they cannot import or distribute equipment and spare parts. The Algerian end-users must import these items either directly or through distributors.
Recent legislation makes it mandatory for distributors of foreign products to provide a warranty of 6-18 months, depending on the type of good, to stock parts in Algeria, and to provide customers with after-sales service.
Principal Business Opportunities
1 Oil and Gas Field Machinery
2 Water Resources Equipment
3 Computers and Peripherals
4 Telecommunications Equipment
5 Food Processing and Packaging Equipment
6 Drugs and Pharmaceuticals
7 Building Products
8 Mining Industry Equipment
© 2000 Mena Report (www.menareport.com)